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Denis Shmygal in Rada (Photo: Vitaliy Nosach, RBK-Ukraine)
The deputies approved the state budget for 2021, dispensing with the night vote. What will the state treasure be next year and what did the Rada and the Cabinet of Ministers discuss? On the RBC-Ukraine material.
The Verkhovna Rada adopted the state budget for 2021 on Tuesday night. “Servant of the people” did not have enough one vote to pass Law 226 “by” without outside help. But the mono-majority was more than helped by the Dovira and Za Maybutne groups, as well as the Batkivshchyna faction and 11 non-factionals, a total of 289 votes.
Denis Shmygal’s Cabinet of Ministers was criticized for this budget immediately after the bill was presented to the Rada. Additionally, one of the critics was Health Minister Maxim Stepanov, who refused to endorse the document even during its consideration within government walls.
Stepanov again called Tuesday for increased funding for medicine, including increasing doctors’ salaries. The opposition factions also insisted on this, demanding that the Cabinet of Ministers give more money to fight the pandemic. The final figures in the budget for drugs have not changed, but Finance Minister Sergei Marchenko promised to solve this problem by the end of the first quarter.
As the first deputy head of the budget committee, Ivan Krulko (“Batkivshchyna”), explained to RBC-Ukraine, a special fund for the needs of medicine will be created within the budget. “This fund is provided for three main areas. The first is the free vaccination of the population against COVID-19. The second is to overcome the consequences of the coronavirus with a specific list. The third is to increase the salaries of doctors,” he said Krulko.
One of the sources to fill the new special fund will be the unspent funds from the “covid” fund for this year. Now 8.5 billion hryvnias remain, which have not yet been distributed, Krulko said.
Finance Minister Sergei Marchenko (Photo: Vitaliy Nosach, RBC-Ukraine)
Another potential source of replenishment of the new fund is the funds that Naftogaz allegedly did not pay to the state budget. “These are violations that were established by the State Audit Service. According to them, this amount is 75 billion hryvnia. We will make sure that the government credits these funds to the budget. And so it will fill a special fund for vaccination and overcoming the consequences of the coronavirus, “said Krulko. …
However, while the specific amounts of the NAK have not been specified in the law on the state budget. But that possibility, of which Krulko speaks, is effectively enshrined in the document.
Life is beyond our means
Other complaints about the budget include oversized deficits and inflated revenues. The deficit, following consultations with the IMF, was reduced by almost UAH 24 billion, to UAH 246 billion, but not through spending cuts, but by increasing the revenue plan by more than UAH 21 billion, to UAH 1.092 billion. .
Many are still skeptical about the Finance Ministry’s ability to finance the deficit, that is, borrow as much as it plans. And although in the end the loan plan was reduced somewhat, it is still 57.2 billion hryvnia more than the 2020 plan, which has not been met by 30% in 11 months.
The secretary of the budget commission Vladimir Tsabal (“Golos” faction) believes that there is no guarantee that the budget will not have to vote again in a few months due to the lack of realism of the indicators set out in it.
“In March, when we voted in favor of the budget, there were only numbers. Now we see that many expenses and deficits are not being covered. 94 billion UAH is not being met in 11 months, including 15 billion in defense and 24 billion in medicine.” , – said Tsabal.
What has changed since the first reading? In the course of finalizing the draft for the final vote, the Ministry of Finance abandoned the idea of the deputies to increase the plan of deductions from the profits of the National Bank by UAH 12 billion, leaving this figure at the level of UAH 33 billion.
Due to the decision to postpone the increase in the minimum wage to 6500 UAH from July 1 to December 1, it will be possible to save on wage costs in the public sector. This step will also allow, as expected in the Finance Ministry, to collect more income taxes (for 0.8 billion hryvnia). At the same time, the anticipated income from personal income tax and VAT will be reduced by more than 2 billion hryvnia in total.
To save money, they also decided to reduce the subsidies to the Pension Fund by 8.5 billion UAH. This is due to the revision of the income forecast of the Unified Social Contribution. And although the budget commission agreed with this, it nevertheless indicated that the decision of the Cabinet of Ministers was not sufficiently reasoned, since the financial condition of the Pension Fund is deteriorating and the dependence on loans from the Public Treasury is growing . And therefore, there is a risk that FP subsidies will have to be revised next year, thus increasing the budget deficit.
Battle for excise duties
When reviewing the budget, disputes arose over the excise tax on fuel. In recent years, 13.44% of the excise duty has been kept in local budgets. Starting next year, unsurprisingly, the Ministry of Finance would bring the entire resource to the central treasury. But this was expected to be opposed on the ground, given that the issue price for them is 8.8 billion hryvnia.
What did the Cabinet of Ministers offer? Taking the special tax, they left compensation for the cities in return. We are talking about subsidies to local road budgets. Each municipality that requests this money must present a certificate of the length of its roads. Therefore, they supposedly wanted to comply with the principle of equitable distribution of subsidies: the more roads, the more money, and therefore vice versa.
But, as a source in the local self-government environment explained to RBC-Ukraine, this is a hardly viable condition for most settlements, at least in the coming months. “It takes time to make an inventory of roads, up to six months. At that time, the money will be in the Single Treasury Account, which will give liquidity to the Ministry of Finance. Even with a loyal head of the Regional State Administration, it will be difficult to get money quickly, “explained the source.
Rada approved the state budget for 2021 with 289 votes (Photo: Vitaliy Nosach, RBK-Ukraine)
Despite criticism from cities, this option was supported by the budget committee. However, when considering this issue, the deputies intervened, placing amendments to the draft amendment to the Budget Code for confirmation. One of them provided for the automatic transfer of the special tax to local budgets for an unlimited period, the other for at least one year.
Both editions received more than the minimum of 226 votes in favor. Besides the fact that they weren’t coordinated with each other, they also destroyed the budget structure. Due to which, the committee was forced to leave for an unscheduled meeting, and the Rada was forced to take a break for several hours. The Finance Ministry finally gave in: after the break, it was decided not to confront the local government, leaving the excise tax in effect.
The “social economist” of discord
There are other reasons why cities are not satisfied with the new budget. The Cabinet of Ministers and the Rada decided to cut funding for the State Fund for Regional Development, “donating” more than half of its budget to subsidies for socio-economic development, the so-called “social economy.”
This grant, as a rule, is used as a kind of bonus for the majority of votes to vote on the budget. According to RBC-Ukraine, the majority shareholders of the groups that supported the budget should receive at least 50 million hryvnia for their districts. Yes, of course, this money is finally available.
Before the first reading, more than 7.3 billion hryvnias were allocated to the social economy, and at the second reading it was reduced to 6 billion hryvnias. Furthermore, more than half (more than 3.3 billion hryvnia) must be paid for licenses to conduct games of chance and lotteries. Because of this, there is a risk that if a company refuses to buy licenses, many controlling shareholders will find themselves without the promised “budget bonuses”.
Who will receive the rest of the “social economy” will be decided by the special commission of the Ministry of Finance, half of whom must be members of the budget committee. But the decision on the allocation of funds will be made by the Cabinet on the basis of the projects approved by this commission. This means that it cannot be ruled out that the distribution of funds is made unevenly between regions, but rather on the basis of political expediency.
